Sri. V. Babu Kumar, Bangalore V. DCIT, Bangalore

ITA 112/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60713 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-04-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: V RANGANADHAN
• Section: 143(3); 54F; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.112/BANG/2011 (ASSESSMENT YEAR : 2006-07) SHRI V. BABU KUMAR, NO.3667, 8 TH CROSS, 13 TH E MAIN, HAL II ND STAGE, INDIRANAGAR, BANGALORE-560 038 . APPELLANT. PAN AEBPB3981N VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 7(2), BANGALORE. .. RESPONDENT. APPELLANT BY : SHRI V. RANGANADHAN. RESPONDENT BY : SMT. SUSAN THOMAS JOSE. DATE OF HEARING : 23.04.2012. DATE OF PRONOUNCEMENT : 27.04.2012. O R D E R PER SHRI JASON P. BOAZ : THIS APPEAL, BY THE ASSESSEE, IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, BANGALORE DATED 26.10.201 0. 2. THE FACTS OF THE CASE, IN BRIEF ARE AS UNDER : 2.1 THE ASSESSEE, AN INDIVIDUAL, FILED HIS RETURN O F INCOME FOR ASSESSMENT YEAR 2006- 07 ON 30.10.2006 DECLARING INCOME OF RS.25,73,874. SCRUTINY PROCEEDINGS WERE TAKEN UP BY ISSUE OF NOTICE UNDER SECTION 143(2) ON 23.6.20 07. THE ASSESSEE, IN THE RELEVANT 2 ITA NO.112/BANG/11 PERIOD, DECLARED INCOME FROM CAPITAL GAINS ON SALE OF IMMOVABLE PROPERTY ON 1.12.2005 FOR A CONSIDERATION OF RS.1,26,00,000. HE COMPUTED LO NG TERM CAPITAL GAINS AMOUNTING TO RS.1,10,17,534 THEREON AND CLAIMED EXEMPTION UNDER SECTION 54F OF THE ACT AMOUNTING TO RS.84,43,660 WHICH INCLUDED THE COST OF A SITE PURC HASED ON 18.5.2006 AMOUNTING TO RS.49,23,330 AND ADVANCE OF RS.35,20,300 PAID TOWAR DS CONSTRUCTION OF HOUSE PROPERTY. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY A N ORDER UNDER SECTION 143(3) ON 29.12.2008 DETERMINING THE INCOME OF THE ASSESSEE A T RS.60,15,011. AGGRIEVED BY THE ORDER OF ASSESSMENT, THE ASSESSEE WENT IN APPEAL BE FORE THE CIT(A) WHO BY ORDER DT.26.10.2010 ALLOWED THE ASSESSEE PARTIAL RELIEF W HEREBY THE INCOME OF THE ASSESSEE WAS REVISED TO RS.41,10,892. THE ASSESSEE IS NOW IN AP PEAL BEFORE US. 3.0 THE ASSESSEE ORIGINALLY FILED GROUNDS OF APPEAL DT.4.2.2011 AND SUBSEQUENTLY FILED REVISED GROUNDS OF APPEAL ON 28.2.2012 WHICH ARE AS UNDER (SINCE THEY WERE NOT NUMBERED, THEY HAVE BEEN NUMBERED IN SERIATIM) : 1. THE ASSESSING OFFICER ERRED IN DETERMINING THE TOTAL INCOME AT RS. 54,94,225 AS AGAINST RS. 25,73,876 DECLARED IN THE RETURN. 2. THE HON'BLE CIT(A) ERRED IN CONFIRMING THE DIS ALLOWANCE MADE BY ASSESSING OFFICER OF A SUM OF RS. 9 LAKHS INCURRED THROUGH ON E SRI D. SHIVAKUMAR FOR PURCHASE OF WOOD AND MAKING DOORS FRAME, WINDOW FRA MES, SHUTTERS, KITCHEN CABINETS FOR THE NEW RESIDENTIAL HOUSE UNDER CONSTR UCTION. 3. THE ASSESSING OFFICER AND HON'BLE CIT(A) OUGHT NOT TO HAVE OVER LOOKED THE CONFIRMATION LETTER FROM SRI D. SHIVAKUMAR ABOU T THE RECEIPT OF RS. 9 LAKHS FROM THE APPELLANT FOR MAKING WOODEN MATERIAL REQUI RED FOR THE RESIDENTIAL PROPERTY UNDER CONSTRUCTION. 4. THE ASSESSING OFFICER AND HON'BLE CIT(A) OVER LOOKED THE FACTS THAT DOORS AND WINDOWS AND KITCHEN CABINETS BEING PART O F NEW RESIDENTIAL HOUSE AND CONSIDERING THAT THE CONFIRMATION LETTER OF SRI D. SHIVAKUMAR FOR INCURRING THE SAME THROUGH HIM, OUGHT NOT TO HAVE DISALLOWED THE CLAIM. 3 ITA NO.112/BANG/11 5. THE HON'BLE CIT(A) ERRED IN ALLOWING ONLY RS. 4 ,10,00 OUT OF RS. 10,20,355 INCURRED FOR LABOUR CHARGES AND PURCHASES OF MATERI AL FOR THE CONSTRUCTION, THOUGH HE AGREED WITH THE EXPLANATION AND SELF MADE STATEMENT OF EXPENSES THAT AN AMOUNT OF RS.16,20,300 WAS PAID TO VARIOUS SUPPLIERS FOR PURCHASE OF MATERIALS FROM OPEN MARKET FOR COMPETITIVE RATES AN D FOR TIMELY SUPPLY AND FOR WHICH NO REASON HAS BEEN ASSIGNED BY HON'BLE CIT(A) FOR DISALLOWANCE OF BALANCE OF RS. 6,10,253. 6. THE ASSESSING OFFICER AND CIT(A) OUGHT TO HAVE ALLOWED THE EXPENSES OF RS. 4,79,500 INCURRED UP TO 31.3.2007 AND RS. 11,45 ,894 INCURRED DURING THE PERIOD 1.4.2007 TO 30.8.2008 AS PURCHASE OF MATERIA LS FOR THE CONSTRUCTION WERE MADE WITHIN A PERIOD OF 3 YEARS FROM THE DATE OF SALE OF SUBJECT PROPERTY TO CAPITAL GAINS. 7. THE ASSESSING OFFICER AND HON'BLE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE SALE OF LAND BEING 1.12.2005 FOR RS. 1,10,12,554 SUBSTANTIAL PORTION AMOUNTING TO RS. 84,43,630 WAS INCURRED INC ONSTRUCTION UP TO 31.10.2006 BEING DUE DATE FOR FILING THE RETURN FOR ASSESSMENT YEAR 2006-07 AND THAT RESIDENTIAL HOUSE WAS COMPLETED IN AUGUST, 2008, WITHIN STIPULATED PERIOD OF 3 YEARS BY INCURRING TOTAL EXPENSES OF RS . 1,00,69,395 AND SUPPORTING VOUCHERS FOR RS. 84,96,153 WERE PRODUCED TO THE ASS ESSING OFFICER. DISALLOWANCE IS UNCALLED FOR. 8. THE ASSESSING OFFICER AND HON'BLE CIT(A) OUGHT TO HAVE ACCEPTED THE FACT THAT A SUM OF RS. 15,73,242 WAS INCURRED FOR PURCHA SE OF CEMENT, SAND, STEEL AND OTHER MATERIALS FOR THE CONSTRUCTION OF RESIDEN TIAL HOUSE, FROM OPEN MARKET FOR TIMELY SUPPLY OF MATERIALS FOR EARLY COM PLETION OF CONSTRUCTION. 9. THE DISALLOWANCE OF RS. 9 LAKHS TOWARDS COST OF WOOD ETC, RS. 6,10,255 TOWARDS PURCHASE OF MATERIALS AND EXPENSES OF RS. 4 ,79,500 UP TO 31.3.2007 AND RS. 11,45,894 INCURRED DURING 1.4.2007 TO 30.8. 2008 I.E. INCURRED WITHIN THE STIPULATED PERIOD OF 3 YEARS IN DETERMINING THE COS T OF CONSTRUCTION FOR THE PURPOSE OF ARRIVING AT LONG TERM CAPITAL GAINS IS N OT IN CONFORMITY WITH LAW AND FACTS OF THE CASE AND HENCE MAY BE DELETED AND JUST ICE RENDERED. 10. THE ASSESSING OFFICER AND HON'BLE CIT(A) OUGHT TO HAVE CONSIDERED VARIOUS DECISIONS CITED IN SUPPORT OF THE CLAIMS, T O DETERMINE THE COST OF CONSTRUCTION. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. 4.1 THE GROUNDS OF APPEAL AT S.NO.1 IS GENERAL IN NATURE AND HENCE NO ADJUDICATION IS CALLED FOR THEREON. 4 ITA NO.112/BANG/11 4.2 IN THE COURSE OF HEARING OF THE APPEAL, THE LEA RNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE GROUND OF APPEAL AT S.NO.6 IS NOT BEING PRESSED AS THE ASSESSEE INTEND TO FILE A RECTIFICATION APPLICATION BEFORE THE CIT( A). THIS GROUND IS ACCORDINGLY DISMISSED. 4.3 THE GROUNDS OF APPEAL AT S.NOS.7 TO 10 WERE NOT ARGUED IN THE COURSE OF HEARING AND ARE HENCE NOT ADJUDICATED UPON. 5.1 DISALLOWANCE OF RS.9 LAKHS OUT OF COST OF CONST RUCTION OF RESIDENTIAL BUILDING. 5.1.1 IN THE GROUNDS OF APPEAL AT S.NOS.2 TO 4 , THE ASSESSEE CONTENDS THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF AN AMOUNT OF RS.9 LAKHS RECEIVED THROUGH SHRI D.SHIVAKUMAR FO R PURCHASE OF WOOD AND MAKING DOOR FRAMES AND OTHER WOODEN MATERIAL REQUIRED FOR CONST RUCTION OF THE NEW RESIDENTIAL HOUSE. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THA T THE LEARNED CIT(A) OVER LOOKED THE FACT THAT DOORS AND WINDOWS WERE REQUIRED FOR T HE NEW RESIDENTIAL HOUSE AND ALSO IN NOT CONSIDERING THE CONFIRMATION LETTERS DT.10.10.2 006 AND 28.11.2008 GIVEN BY SHRI D. SHIVAKUMAR, ABOUT THE RECEIPT OF RS.9 LAKHS FROM TH E ASSESSEE FOR THIS PURPOSE WHICH WERE PLACED AS ANNEXURES A AND B TO THE WRITTEN SUB MISSIONS FILED BY HIM. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD PURCHASED THE RESID ENTIAL BUILDING SITE ON 18.5.2006 FOR A SUM OF RS.49,23,360 AND INVESTMENTS AMOUNTING TO RS .35,20,300 WERE GIVEN TO SHRI D. SHIVAKUMAR AND OTHERS FOR CONSTRUCTION OF THE RESID ENTIAL BUILDING. THE LEARNED AUTHORISED REPRESENTATIVE CONTENDED THAT THE ASSESS ING OFFICER DISALLOWED THE CLAIM OF RS.9 LAKHS MERELY ON THE BASIS OF A STATEMENT OF SH RI D. SHIVAKUMAR THAT THE AMOUNT OF RS.9 LAKHS WAS RECEIVED FROM THE ASSESSEE FOR MAKIN G WOODEN FURNITURE AND OVERLOOKED SHRI D. SHIVAKUMAR LETTER DT.28.11.2008 WHEREIN HE CONFIRMED THE PURCHASE OF DOORS AND 5 ITA NO.112/BANG/11 FRAMES FOR THE HOUSE. IT WAS ALSO ARGUED THAT NO O PPORTUNITY TO CROSS-EXAMINE SHRI SHIVAKUMAR WAS GIVEN TO THE ASSESSEE THEREBY DENYIN G HIM REASONABLE OPPORTUNITY OF HEARING AND THAT THE DISALLOWANCE OF RS.9 LAKHS BY THE ASSESSING OFFICER AND CONFIRMATION BY THE LEARNED CIT(A) BEING MERELY ON SUSPICIONS AN D SURMISES SHOULD THEREFORE BE DELETED. 5.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE CONTRARY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES STATING THAT THE DISALLOWA NCE OF RS.9 LAKHS OF EXPENDITURE CLAIMED FOR FURNITURE WAS CORRECTLY DISALLOWED AS I T WAS NOT THE PART OF THE CONSTRUCTION OF THE NEW RESIDENTIAL BUILDING. SHE TOOK US THROU GH THE RELEVANT PORTIONS OF THE ORDER OF ASSESSMENT AND SPECIFICALLY TO PAGES 3 TO 6 THEREOF . IT WAS SUBMITTED THAT THE ASSESSING OFFICER IN ORDER TO EXAMINE AND VERIFY THE CLAIM MA DE BY THE ASSESSEE RECORDED THE STATEMENT ON OATH OF SHRI D. SHIVAKUMAR UNDER SECTI ON 131 OF THE ACT ON 5.12.2008. IN ANSWERS TO QUESTION NOS.6 AND 7 OF THE STATEMENT, S HRI D. SHIVAKUMAR, BROTHER-IN-LAW OF THE ASSESSEE STATED THAT HE HAD GOT COTS, SOFA SET, DIVAN, DINING SET AND OTHER FURNITURES MADE FOR THE ASSESSEE THROUGH CARPENTERS KNOWN TO H IM AND FOR THESE WORKS RECEIVED RS.9 LAKHS. THE LEARNED DEPARTMENTAL REPRESENTATIVE STR ONGLY COUNTERED THE LEARNED AUTHORISED REPRESENTATIVES CLAIM THAT THE ASSESSIN G OFFICER MADE THE DISALLOWANCE OF RS.9 LAKHS WITHOUT GIVING THE ASSESSEE OPPORTUNITY OF HEARING OR TO CROSS-EXAMINE SHRI SHIVAKUMAR. SHE POINTED OUT THAT IN PARA 7 OF THE A SSESSMENT ORDER IMMEDIATELY AFTER RECORDING THE STATEMENT ON 5.12.2008 ITSELF, THE AS SESSING OFFICER BY WAY OF A LETTER SENT TO THE ASSESSEE, ASKED HIM TO RESPOND TO THE S TATEMENT OF SHRI SHIVAKUMAR AND TO WHICH THE ASSESSEE REPLIED. SHE ALSO DREW OUR ATTE NTION TO THE FACT THAT THE A.O.HAD ALSO 6 ITA NO.112/BANG/11 NOTED THAT THERE WERE NO DOCUMENTARY PROOF OR BILLS PRODUCED FOR VERIFICATION FOR THIS WORK CARRIED OUT BY SHRI D. SHIVAKUMAR FOR THE ASSE SSEE; THAT RS.6 LAKHS PAID TO SHRI SHIVAKUMAR WAS ON 3.11.2005 WHICH IS ALMOST SIX MON THS BEFORE THE ASSESSEE PURCHASED THE RESIDENTIAL SITE ON 18.5.2006. THE LEARNED AUT HORISED REPRESENTATIVE SUBMITTED THAT THE DISALLOWANCE OF RS.9 LAKHS WAS MADE BY THE ASSE SSING OFFICER ONLY AFTER DUE CONSIDERATION AND VERIFICATION OF ALL RELEVANT DETA ILS PRODUCED AND THE SAME IS IN ORDER. SHE ALSO DREW OUR ATTENTION TO PARA 7.4(I) OF THE L EARNED CIT(A) ORDER, ON PAGE 7 THEREOF, WHERE HE CONFIRMED THE DISALLOWANCE MADE BY THE ASS ESSING OFFICER IN VIEW OF THE DEPOSITION MADE BY SHRI D. SHIVAKUMAR BEFORE THE AS SESSING OFFICER IN HIS STATEMENT UNDER SECTION 131 CONSIDERING THAT HE HAD SUPPLIED ONLY WOODEN ARTICLES SUCH AS COTS AND OTHER FURNITURE WHICH CANNOT BE CONSTRUED AS WOODEN ARTICLES REQUIRED FOR CONSTRUCTION OF A RESIDENTIAL BUILDING. IN THESE CIRCUMSTANCES, TH E LEARNED DEPARTMENTAL REPRESENTATIVE PRAYED THAT THE DISALLOWANCE OF RS.9 LAKHS BE SUSTA INED. 5.3 WE HAVE HEARD BOTH PARTIES, CONSIDERED THE SUBM ISSIONS MADE AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IT IS A MATTER OF RECORD THAT THE ASSESSEE WHEN CALLED UPON BY THE ASSESSING OFFICER TO FURNISH DETAILS OF EXPENSES INCURRED TOWARDS HOUSE CONSTRUCTION INTER ALIA CLAIMED THAT AN AMOUNT OF R S.9 LAKHS WAS ADVANCED TO SRI D. SHIVAKUMAR, HIS BROTHER-IN-LAW FOR THE PURPOSE AND FOR WHICH A CONFIRMATION FROM HIM DT.10.10.2006 WAS FILED ALONG WITH THE RETURN OF IN COME FOR ASSESSMENT YEAR 2006-07. IT IS SEEN FROM PAGES 2 TO 6 OF ASSESSMENT ORDER THAT THE ASSESSING OFFICER IN ORDER TO VERIFY THE CLAIM MADE, RECORDED THE STATEMENTS OF S HRI SHIVAKUMAR UNDER SECTION 131 OF THE ACT ON 5.12.2008 WHEREIN IN THE COURSE OF DEPO SITION, HE CONFIRMED THAT HE HAD 7 ITA NO.112/BANG/11 RECEIVED AN AMOUNT OF RS.9 LAKHS (ANSWER TO QUESTIO N NO.7) FROM THE ASSESSEE, FOR FURNITURE ITEMS MADE THROUGH CARPENTERS KNOWN TO HI M. THE ASSESSING OFFICER ON THE VERY SAME DAY SENT A LETTER TO THE ASSESSEE AFFORDI NG HIM AN OPPORTUNITY OF RESPONDING TO SHRI D. SHIVAKUMAR STATEMENT WHICH HE DID AND WHICH THE ASSESSING OFFICER CONSIDERED WHILE FRAMING THE ORDER OF ASSESSMENT. THE LEARNED AUTHORISED REPRESENTATIVES CLAIM, IN THE WRITTEN SUBMISSIONS, THAT THE ASSESSEE WAS DENI ED REASONABLE OPPORTUNITY OF HEARING ON THIS ISSUE IS THEREFORE INCORRECT. THE LEARNED AUTHORISED REPRESENTATIVES CLAIM THAT THE ASSESSEE WAS NOT AFFORDED AN OPPORTUNITY OF CRO SS-EXAMINING SHRI SHIVAKUMAR ALSO APPEARS TO BE INCORRECT, AS NOWHERE IN THE RECORD W E FIND THAT THE ASSESSEE HAS MADE SUCH A REQUEST TO THE ASSESSING OFFICER. THE ASSESSEES RELIANCE ON A CONFIRMATION DT.18.11.2008 BY SHRI D. SHIVAKUMAR IS BEING DISREG ARDED FOR THE REASON THAT THERE IS NO PROOF THAT IT WAS FILED BEFORE ASSESSING OFFICER OR CIT(A) AND ALSO BECAUSE IT IS MERELY A SELF-SERVING DOCUMENT BEREFT OF ANY CORROBORATIVE E VIDENCE. WE FIND THAT IN COMING TO THE DECISION TO MAKE THE DISALLOWANCE OF RS.9 LAKHS BEING EXPENDITURE INCURRED FOR HOUSEHOLD FURNITURE AND NOT RELATED TO CONSTRUCTION OF THE RESIDENTIAL HOUSE, THE ASSESSING OFFICER HAS VERY SUCCINCTLY LAID DOWN THE REASONS FOR HIS FINDING IN PARA 8 OF THE ORDER OF ASSESSMENT WHICH ARE AS UNDER : A. THE WITNESS SRI SHIVAKUMAR IN HIS STATEMENT RE CORDED UNDER SECTION 131 UNDER OATH ON 5.12.2008 STATED VERY CLEARLY THAT HE HAD RECEIVED THE AMOUNT FOR MAKING COT, FURNITURES ETC. THE SUBMISSION BY THE ASSESSEE THAT SRI D. SHIVAKUMAR HAD ACTUALLY CARRIED OUT THE WORK OF MAK ING DOORS AND FRAMES ARE UNSUBSTANTIATED. FURTHER, THE ASSESSEES SUBMISSIO N THAT PAYMENT MADE TOWARDS FURNITURE IS ALSO INCLUDED IN CONSTRUCTION ACTIVITY IS BEYOND THE MEANING OF AMOUNT SPENT TOWARDS BUILDING RESIDENTIAL HOUSE . B. THE ASSESSEE HAS CLAIMED THAT THESE AMOUNTS HAV E BEEN PAID ON THE FOLLOWING DATES : 8 ITA NO.112/BANG/11 I) 28.01.06 CANARA BANK : 734540 RS.2,00,000 II) 22.03.06 CANARA BANK : 743932 RS. 1,00,000 III) 03.11.05 CANARA BANK : 734532 RS. 6,00,000 FROM THE BANK STATEMENT PRODUCED BY THE WITNESS SRI D. SHIVAKUMAR, IT IS SEEN THAT THERE IS ONLY ONE DEPOSIT OF RS. 6 LAKHS ON TH E SAID DATE. IN FACT, THE OTHER TWO PAYMENTS, I.E. PAYMENT OF RS. 2 LAKHS MA DE TO SRI D. SHIVAKUMAR AND MOTHER IN LAW OF THE ASSESSEE, DO NOT FIGURE ANYWHE RE IN THE BANK STATEMENTS. THUS IT IS NOT CLEAR WHY THESE PAYMENTS HAVE BEEN M ADE BY THE ASSESSEE TO HIS MOTHER IN LAW AND BROTHER IN LAW. C. FROM THE BANK ACCOUNT OF THE WITNESS SRI D. SHI VAKUMAR, THE BROTHER IN LAW OF THE ASSESSEE, IT IS SEEN THAT THERE ARE A LOT OF OTHER TRANSACTIONS BETWEEN HIM AND THE ASSESSEE IN THE VARIOUS FINANCIAL YEARS . HENCE IT CANNOT BE SAID THAT THE AMOUNT OF RS. 8 LAKHS SUPPOSEDLY PAID TO H IM IS FOR THE CONSTRUCTION ACTIVITY ONLY. D. THERE IS NO DOCUMENTARY PROOF OR BILLS FOR ANY WORK CARRIED OUT BY SRI D. SHIVAKUMAR ON BEHALF OF SRI BABUKUMAR. E. THE ASSESSEE HAS PURCHASED THE LAND ONLY ON 18. 05.2006 WHICH IS LATER TO THE DATES ON WHICH PAYMENTS HAVE BEEN SUPPOSEDLY MA DE TO SRI D. SHIVAKUMAR. THE CLAIM THAT THE MONEY PAID TO SRI D. SHIVAKUMAR IS FOR CONSTRUCTION ACTIVITY CANNOT BE ACCEPTED BECAUSE IT IS HIGHLY IMPROBABLE THAT THE ASSESSEE WOULD GET DOORS, FRAMES, ETC DONE BEFORE EVEN PURCHASING THE LAND. F. FURTHER AS STATED BY SRI D. SHIVAKUMAR IN HIS S TATEMENT UNDER SECTION 131, HE HAS NOT FILED ANY RETURNS FOR ASSESSMENT YEARS 2 006-07, 07-08 & 08-09. HENCE DUE TO THE REASONS CITED ABOVE RS. 9 LAKHS PA ID BY THE ASSESSEE TO HIS BROTHER IN LAW AND MOTHER IN LAW IS DISALLOWED FROM THE CLAIM OF 54F AND ADDED BACK TO THE INCOME RETURNED. THE LEARNED CIT(A) HAS CONCURRED WITH THE FINDING O F THE ASSESSING OFFICER AFTER TAKING INTO CONSIDERATION ALL THE MATERIAL ON RECORD. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AS DISCUSSED AT PARAS 5.1 TO 5.3, WE HAVE NO HESITATION IN UPHOLDING AND SUSTAINING THE DISALLOWANCE OF RS.9 LAKHS OF EXPENDITURE AS IT IS ESTABLISHED THAT IT WAS NOT UTILIZED FOR CONSTRUCTION OF THE ASSESSEES RESIDENTIAL BUIL DING AS MADE BY THE ASSESSING OFFICER 9 ITA NO.112/BANG/11 AND CONFIRMED BY THE LEARNED CIT(A). THE ASSESSEE S GROUNDS MENTIONED AS S.NOS.2 TO 4 ACCORDINGLY DISMISSED. 6.1 IN THE GROUNDS OF APPEAL MENTIONED AT S.NO.5 , THE ASSESSEE CHALLENGES THE CIT(A)S ACTION IN ALLOWING ONLY RS.4,10,000 OUT OF RS.10,20 ,355 BEING EXPENDITURE INCURRED FOR LABOUR CHARGES AND PURCHASES OF MATERIAL FOR CONSTR UCTION OF RESIDENTIAL BUILDING. IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSEE INCURRED EXPENDITURE AMOUNTING TO RS. 16,20,300 TOWARDS LAB OUR CHARGES AND MATERIAL PURCHASE THROUGH ONE ARUNKUMAR. HE FURTHER STATED THAT AS BILLS FOR SUCH EXPENDITURE WERE PRODUCED ONLY TO THE EXTENT OF RS.5,99,945 BEFORE T HE ASSESSING OFFICER, HE ALLOWED THIS CLAIM AND DISALLOWED THE BALANCE EXPENDITURE OF RS. 10,20,355 AS THEY WERE NOT SUPPORTED BY BILLS. IT IS SUBMITTED THAT IN APPEAL, THE LEAR NED CIT(A) IN PARA 7.4(III) ON PAGES 7 AND 8 OF HIS ORDER HAS HELD THAT -- (III) IN VIEW OF THE DOCUMENTARY EVIDENCE PRODUCE D CONVINCINGLY TO THE ASSESSING OFFICER REGARDING THE COMPLETION OF THE R ESIDENTIAL BUILDING, WHICH IMPLIED THAT THE APPELLANT HAD NECESSARILY INCURRED MATERIALS AND LABOUR EXPENSES ESSENTIAL FOR COMPLETION OF A BUILDING, TH E ASSESSING OFFICER IS DIRECTED TO ALLOW A PARTIAL AMOUNT OF RS. 4,10,000 OUT OF THE CLAIM OF EXPENDITURE OF RS. 10,20,355 IN RELATION TO PROCURE MENT OF MATERIALS IN OPEN MARKET AND LABOUR EXPENSES MADE WITHOUT PROPER BILL S IN REGARD TO THE CONSTRUCTION WORKS. IT WOULD NOT BE OUT OF PLACE T O MENTION HERE THAT FOR CONSTRUCTION OF PROPERTY FOR SELF USE, THE LABOUR P AYMENTS MADE WOULD BE MADE THROUGH SELF MADE VOUCHERS AND NO CONSTRUCTION ACTI VITY CAN BE CARRIED OUT WITHOUT CERTAIN PROPORTION OF LABOUR PAYMENTS. CON SIDERING THESE FACTORS, IT WOULD BE REASONABLE TO ALLOW A RELIEF OF RS. 4,10,0 00 OUT OF THE CLAIM OF EXPENDITURE OF RS. 10,20,355 AS STATED ABOVE WHICH IS APPROXIMATELY 40% OF THE EXPENSES INCURRED. THE LEARNED AUTHORISED REPRESENTATIVE CONTENDS THAT AFTER HAVING BEEN ACCEPTED THE REASONABLENESS OF THE EXPLANATION FOR INCURRING OF EXPENDITURE OF RS.16,20,300 ON LABOUR 10 ITA NO.112/BANG/11 CHARGES AND PROCUREMENT OF MATERIAL THROUGH SHRI AR UNKUMAR, THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED THE ENTIRE EXPENDITURE CLAIMED BUT ALLOWED THE ASSESSEE ONLY PARTIAL RELIEF OF RS.4,10,000 ON ESTIMATED BASIS OUT OF RS.10,20,3 55 DISALLOWED BY THE ASSESSING OFFICER, THEREBY SUSTAINING THE DISALLOWANCE OF EXP ENDITURE TO THE EXTENT OF RS.6,10,355. IT WAS PLEADED THAT THE EXPENDITURE OF RS.16,20,300 BE ALLOWED IN FULL. 7.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE OPPOSED THE CLAIM OF THE ASSESSEE AND SUBMITTED THAT OUT OF TOTAL EXPENDITURE CLAIMED TO BE SPENT FOR LABOUR CHARGES AND PROCUREMENT OF MATERIALS FOR CONSTRUCTION OF THE AS SESSEE ASSESSEES RESIDENTIAL BUILDING, THE ASSESSING OFFICER ALLOWED EXPENDITURE OF RS.5,9 9,945 WHICH WERE SUPPORTED BY BILLS DISALLOWING THE BALANCE OF RS.10,20,355. THE LEARN ED CIT(A) FURTHER ALLOWED AN AMOUNT OF RS.4,10,000 ON AN ESTIMATED BASIS, THEREBY SUSTAINI NG THE DISALLOWANCE TO AN AMOUNT OF RS.6,10,355. THE LEARNED DEPARTMENTAL REPRESENTATI VE ARGUED THAT IN THESE CIRCUMSTANCES, THE ASSESSEE HAS BEEN GIVEN MORE THA N ADEQUATE RELIEF BY THE LEARNED CIT(A) AND THEREFORE HIS CLAIM FOR ANY FURTHER RELI EF SHOULD BE REJECTED. 7.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSE D AND CONSIDERED THE SUBMISSIONS MADE AND THE MATERIAL ON RECORD. OUT OF THE TOTAL EXPENDITURE CLAIMED TO BE SPENT ON LABOUR CHARGES AND PROCUREMENT OF MATERIAL, THE ASS ESSING OFFICER ALLOWED EXPENDITURE TO THE EXTENT OF RS.5,99,945 AS THEY WERE SUPPORTED BY BILLS. IN APPELLATE PROCEEDINGS, IT IS SEEN THAT THE LEARNED CIT(A) NOTED THAT . IN VIEW OF THE DOCUMENTARY EVIDENCE PRODUCED CONVINCINGLY TO THE ASSESSING OFFICER REG ARDING THE COMPLETION OF THE RESIDENTIAL BUILDING, WHICH IMPLIED THAT THE ASSESS EE HAD NECESSARILY INCURRED MATERIAL AND LABOUR EXPENSES ESSENTIAL FOR COMPLETION OF A BUILD ING AND THEN PROCEEDED TO ALLOW THE 11 ITA NO.112/BANG/11 RELIEF OF RS.4,10,000 OUT OF THE DISALLOWANCE OF RS .10,20,355 PURELY ON AN ESTIMATE BASIS. WE FIND THAT THERE IS SOME MERIT IN THE ARGUMENT PU T FORWARD BY THE ASSESSEE, THAT IF THE LEARNED CIT(A) WAS OF THE VIEW THAT THE DOCUMENTARY EVIDENCE PRODUCED BEFORE THE ASSESSING OFFICER BY THE ASSESSEE WAS CONVINCING EN OUGH TO IMPLY THAT THE ASSESSEE HAD INCURRED MATERIAL AND LABOR EXPENSES ESSENTIAL FOR COMPLETION OF THE BUILDING, THEN HE SHOULD HAVE ALLOWED THE ASSESSEES CLAIM AND NOT SU STAINED ANY PORTION OF THE DISALLOWANCE. HOWEVER, WE ARE UNABLE TO CONCUR WITH THE VIEW THAT THE ENTIRE EXPENDITURE CLAIMED BE ALLOWED AS IN NORMAL CONSTRUCTION ACTIVITY, LABOUR CHARGES / EXPENSES ARE GENERALLY MADE THROUGH SELF MADE VOUCHER AND BILLS AND THEREFORE T HE LIKELIHOOD OF CLAIMING SUCH EXPENSES EXCESSIVELY CANNOT BE RULED OUT. IN THESE CIRCUMSTANCES AND AFTER OVERALL CONSIDERATION OF THE FACTUAL SITUATION OF THE CASE, WE FEEL IT WOULD BE FAIR AND SERVE THE INTEREST OF JUSTICE IF THE DISALLOWANCE OF RS.10,20 ,355 BE SUSTAINED TO THE EXTENT OF RS.4,00,000 THEREBY GRANTING THE ASSESSEE FURTHER P ARTIAL RELIEF OF RS.2,10,315. IT IS ORDERED ACCORDINGLY. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL, 2012. SD/- SD/- (GEORGE GEORGE K) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE, DATED: 27/4/2012. *REDDY GP 12 ITA NO.112/BANG/11 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - B BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R ASSTT. REGISTRAR, ITAT, BANGALORE